Shipping Boom: Rates Have Doubled Since 2009

Journal of Commerce — “The Drewry Container Benchmark began tracking the average spot market freight rate from Hong Kong to Los Angeles in late December 2005 and hit its rock bottom at $871 per FEU (forty-foot equivalent units) from July 6 through Aug. 3, 2009. In contrast, a record high of $2,838 per FEU was recorded on Aug. 2 this year (see chart above). The Aug. 16 rate dropped $87 from the week before to $2,737 per FEU in only the second weekly rate decline since March 15.

MP: Compared to shipping rates last summer and fall of about $1,200 per FEU between Hong Kong and L.A., shipping costs have more than doubled to the record high of $2,838 in earlyAugust, before falling slightly to $2,737 last week. Scott Grannis reported today that the Harpex Shipping Index (based on rates charged by container ships in the North Atlantic) has experienced a very similar increase over the last year (rates have more than doubled). Given the ongoing boom in global shipping and the related rising rates (along with improvements in other economic indicators), there’s nothing to suggest a slowdown in the global economic recovery, and certainly nothing to suggest a double-dip recession, as Scott points out.

Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan.

He holds two graduate degrees in economics (M.A. and Ph.D.) from George Mason University in Washington, D.C. and an MBA degree in finance from the Curtis L. Carlson School of Management at the University of Minnesota.

Since 1997, Professor Perry has been a member of the Board of Scholars for the Mackinac Center for Public Policy, a nonpartisan research and public policy institute in Michigan.